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  CPP

The Canada Pension Plan (CPP) is a contributory, earnings-related social insurance program that provides the contributors and their families with partial/supplemental replacement of earnings in the case of retirement, disability or death. The CPP mandates all Canadians who are 18 years of age or over and employed to contribute a fixed portion of their annual earnings income to the federally administered pension plan. CPP is administered federally by Employment and Social Development Canada on behalf of employees in all provinces and territories except Quebec.

"The primary CPP benefit is the monthly pension received at retirement. This pension benefit is intended to supplement an individuals own retirement savings, but not replace it. Currently, this is equal to 25% of the average earnings on which CPP contributions were made over the entire working life of a contributor from age 18 to 65 in constant dollars. The earnings upon which contributions are made are subject to an annual limit, which, in 2018, is $55,900. However, under changes being phased in by 2025, the pension benefit will rise to 33.33% of earnings on which contributions were made, and the maximum amount of income covered by the CPP will rise by 14 percent. (From the projected 2025 limit of $69,700 to $79,400.

Benefits under the CPP enhancement will be calculated based on a forty-year period, taking the best 40 years to calculate the benefit. This calculation effectively allows seven years to be dropped out of the benefit calculation (for an individual who begins contributing at age 18 and ends at age 65).

The earnings ceiling in the CPP is set each January, based on increases in the average wage in Canada. In 2019, the CPP earnings ceiling is $57,400. The contribution rate on these pensionable earnings is 10.2% (9.9% for the base, or original CPP, and 0.3% for the CPP enhancement which began to be phased in on January 1, 2019), the contribution rate is split equally between you and your employer. If you are self-employed, you pay the full 10.2%. 

In March 2016, average monthly benefits for new retirement pension (taken at age 65) was just over $550.00 per month and the maximum amount was $1,092.50. Monthly benefits are adjusted every year based on the Consumer Price Index. CPP benefit payments are taxable as ordinary income.

The main benefit from CPP is the Retirement Pension, however there are several other benefits we will mention that are also available. If you would like to know more about them please visit the CRA website for more details.

Retirement pension 

You can apply for and receive a full CPP retirement pension at age 65 or receive it as early as age 60 with a reduction, or as late as age 70 with an increase.

Post-retirement benefit

If you continue to work while receiving your CPP retirement pension, and are under age 70, you can continue to participate in the CPP. Your CPP contributions will go toward post-retirement benefits, which will increase your retirement income.

Disability benefits

If you become severely disabled to the extent that you cannot work at any job on a regular basis, you and your children may receive a monthly benefit.

Survivor's pension

When you die, a pension may be paid to your surviving spouse

Death benefit

Provides a one-time payment to (or on behalf of) the estate of a deceased CPP contributor.

Children's benefits

Provide monthly payments to the dependent children of disabled or deceased CPP contributors.

The provisions of the CPP include:

Pension sharing

Married or common-law couples in an ongoing relationship may voluntarily share their CPP retirement pensions.

Credit splitting for divorced or separated couples

The CPP contributions you and your spouse or common-law partner made during the time you lived together can be equally divided after a divorce or separation.

Child rearing provision 

If you stopped working or received lower earnings to raise your children, you may be able to use the "child-rearing provision" to increase your CPP benefits."

*all information retrieved through the Canada Revenue Agency*